(Wal-Mart, Target price comparisons article update with Target's first-quarter results.)
NEW YORK ( TheStreet) -- "Save Money. Live Better." Wal-Mart (WMT)has based its business off this iconic motto since 2007. Prior to the catch phrase Wal-Mart operated by the slogan, "Always low prices," for nearly 19 years. But starting in 2011, it appears the retail giant may have abandoned its business model of everyday low prices, further hampering its already pressured domestic sales.
In the first three months of the year, Wal-Mart's prices on food, health and beauty products and other general merchandise were nearly identical, if not a bit pricier, than archrival Target (TGT).
According to pricing studies conducted by Customer Growth Partners, a consumer research firm, January, February and March all revealed Target's prices were lower than Wal-Mart's. The monthly study, which is conducted in four states, compares products across segments, including 30 fresh, frozen and non-perishable groceries, eight household chemicals, paper and other consumables like detergent, seven health and beauty aids like shampoo and counter medicines and 10 general merchandise items like apparel and toys.In CGP's analysis for the first three months of the year, Target held a 0.6% price differential over Wal-Mart. This was the first time since the firm began conducting these studies in 2006 that Target displayed lower prices. In the past, Wal-Mart has typically maintained a 2% to 4% advantage over Target, says CGP President Craig Johnson. If you then factor in Target's new Redcard loyalty program, which offers users a 5% discount, that price difference widens. Of course, not all of Target's customers are Redcard holders. Johnson estimates that the loyalty program makes up about 13% to 16% of sales. But the usage and penetration of the Redcard appears to be increasing, as it provides shoppers at least a 5% discount on new, higher cost, but generally undiscounted consumer electronics items like Apple's (AAPL) new iPad 2 and Nintendo's 3DS. Wal-Mart does not offer a similar program, which could put the company at a further disadvantage moving forward. In a separate study conducted in January by Kantar Retail of just one Wal-Mart and one Target store in Massachusetts, it found that Target's prices were about 2.8% lower than Wal-Mart's. But the research firm noted that Target's low prices are more dependent on temporary sales. This means shoppers need to be willing to change brands based upon the promotions being offered in order to really notice a few extra bucks in their wallets.
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